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The Financial Implications of Divorce: Dividing Assets and Debts


dividing assets ands debts in divorce

When getting divorced one of the biggest considerations by the parties is the financial implications of a divorce and how the assets are to be divided. You may wonder what will happen to your family home, business, pensions and debts, all of which are part of the assets that are usually considered.

This can be an extremely stressful and worrying time, where you have financial uncertainty and the thought of court hanging over you. It is important to know that assets do not always have to be divided by the court and there are alternative ways to resolve matters.

It is important to note that Divorce and finances are two separate matters which run alongside each other. You need to have reached the Conditional Order stage (halfway through) your divorce before any financial settlement can be made legally binding by the court.

Resolving finances can be a complex area of law and it is important that you seek legal advice to ensure any settlement reached is fair and reasonable in the circumstances. Dividing finances can be a contested issue for many divorcing couples and the courts have a wide discretion to deal with how the assets are to be divided.

What assets are considered?

The assets that are considered in reaching a financial settlement is dependent on each marriage.

Generally, the assets which are included are:

  1. Family home
  2. Other properties
  3. Money, savings and investments
  4. Life insurance
  5. Debts, such as credit cards and loans
  6. Personal assets (worth over £500.00 for a single item)
  7. Cars
  8. Businesses
  9. Pensions

Some assets may be classed as non-matrimonial and ringfenced, but this is dependent on the circumstances of each case.

How are the assets divided?

What is considered for a financial settlement is different with each divorce case. There is no ‘one size fits all’ and that is why the courts have a wide discretion when making decisions. The courts will only approve or order a settlement which is fair and reasonable in the circumstances.

Section 25 of the Matrimonial Causes Act 1973 sets out what the Court shall have particular regard to when considering what is a fair and reasonable settlement.

The Court’s starting point is the sharing principle, and this means all matrimonial assets are divided equally between the parties. However, there will not necessarily be equal division of the assets in every case. There are many circumstances of the marriage that are taken into account.

The first consideration is to the welfare and needs of any child of the family who has not attained the age of eighteen. The welfare of the children is always paramount.

Other factors which the court will consider includes:

  • The income, earning capacity, property and other financial resources which each of the parties has or is likely to have in the foreseeable future
  • The financial needs, obligations and responsibilities of the parties
  • The standard of living before the breakdown of the marriage
  • The age of the parties and duration of marriage
  • Any physical or mental disabilities of the parties
  • The contributions made and the conduct of the parties

Fair and reasonable does not always mean equal!

It is a common misconception by parties that a fair and reasonable settlement is a 50/50 split of the assets.

If both parties needs are met by equally sharing the assets then this is how the court will look to divide the finances.

However, it is more often than not that an equal division of the finances is not considered a fair and reasonable settlement.  An unequal division may be required to meet the particular needs of one party, or it is possible for some assets to be ‘non-matrimonial’ such as inheritance in certain circumstances.

It is therefore extremely important to consider the individual needs and circumstances of each party when deciding on the division of assets. The court will consider what division of the finances will enable the needs of both parties to be met.

The process for dividing assets

The first stage is usually for each spouse to provide full and frank financial disclosure to the other. Financial information can be exchanged on a voluntary basis to see if a resolution can be reached without the courts making the decision for you.

If an agreement is reached at this stage, then the parties can apply to the court to make the agreement legally binding. The agreement is usually drawn up in a ‘Consent Order’ by a solicitor. The court will only approve the Consent Order if the agreement reached is fair and reasonable. If the court decides that a consent order is not fair, they can ask for the order to be amended.

If an agreement is not achievable through voluntary disclosure and negotiation, then mediation can be another way of helping parties reach an agreement. However, it is important to note that any agreement reached at mediation is not legally binding, and a Consent Order which is approved by the court will still be required.

The last resort is applying to the court and starting financial proceedings where the court will decide how the finances should be divided. We say this should be a last resort as it is a timely and expensive process.

How can Andrew Isaacs Law help?

Reaching a financial settlement in a divorce can be extremely complicated and stressful. We are here to support you throughout the process and provide you with clear tailored advice on your financial situation.

We are not a firm who will push you into financial proceedings through court if agreement can be reached via alternative means.

Contact us today to arrange a fixed fee initial consultation and see how we can help you.

Nicola Magrath – Family Law Solicitor


Dated:  31/07/2023


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